The Worst Is Yet To Come

I don’t really understand why the Republicans or the Democrats would want to win this election cycle and be forced to take responsibility for the next collapse of the financial system.

I was talking about the fraud that threatens to take down the financial system but there is another big problem – jobs. Everyone is wondering why there is little job growth. Private business is not hiring because not enough people have enough money to buy the things they produce. How did we get here? It’s more than the recession; it’s a structural problem created by supply side economics and “free trade”.

Supply side economics was never a serious economic policy but a scam to take money from the middle class and give it to the top one or two percent. The result was less money in the consumer economy.

I’ll let Ronald Reagan’s Assistant Secretary of the Treasury, Dr Paul Craig Roberts, explain how “free trade” has given the US a third world economy.

For a number of years I reported on the monthly nonfarm payroll jobs data. The data did not support the praises economists were singing to the “New Economy.” The “New Economy” consisted, allegedly, of financial services, innovation, and high-tech services.

This economy was taking the place of the old “dirty fingernail” economy of industry and manufacturing. Education would retrain the workforce, and we would move on to a higher level of prosperity.

Time after time I reported that there was no sign of the “New Economy” jobs, but that the old economy jobs were disappearing. The only net new jobs were in lowly paid domestic services such as waitresses and bartenders, retail clerks, health care and social assistance (mainly ambulatory health care services), and, before the bubble burst, construction.

The facts, issued monthly by the US Bureau of Labor Statistics, had no impact on the ”New Economy” propaganda. Economists continued to wax eloquently about how globalism was a boon for our future.

So “free trade” was just another scam to enrich the corporate CEO’s and Wall Street. Outsourcing jobs has been going on for years as Americans were encouraged to borrow so they could continue to spend and keep the consumer economy going. The borrowing came to a screaching halt as a result of Alan Greenspan’s credit/housing bubble.

Economists and policymakers continue to ignore the fact that all employment in tradable goods and services can be moved offshore (or filled by foreigners brought in on H-1b and L-1 visas). The only replacement jobs are in nontradable domestic services, that is, those jobs that require “hands-on” activity, such as ambulatory health services, barbers, cleaning services, waitresses and bartenders–jobs that describe the labor force of a third world country. Even many of these jobs are now filed with foreigners brought in on R-1 type visas from Russia, Ukraine, Thailand, Romania, and elsewhere.

The loss of American jobs and the compression of consumer income by low wages has removed consumer demand as the driving force of the economy. This is the reason expansionary monetary and fiscal policies are having no effect.

The latest jobs report issued today shows that America’s transformation into a third world economy continues. The economy lost 95,000 jobs in September, mainly due to cuts in local education and federal employment. Part of the loss of 159,000 government jobs was offset by 64,000 new private sector jobs.

Where are the new jobs? They are in nontradable lowly paid domestic services: 32,000 were in health care and social services, and 33,900 were in food services and drinking places.

There you have it. That is America’s “New Economy.”

An economy that depends on consumer spending cannot survive when the well paying jobs are shipped to China and India. There is a name for workers who make a living wage – customers. Without those customers the economy can’t recover.